It’s hard to believe I spent nearly a decade in the financial services industry.
At one point, I was managing almost $30 million dollars of clients’ money. Seriously, why would anyone trust this ugly mug to invest their money? LOL
Anyways, many of you know I was in the industry and have been asking me questions. So today, I thought I would share some of those questions and answers.
If you have any questions, please forward them on to me. I plan on doing a post like this fairly often.
Q1. We have all of our credit cards paid off and enough for a 20% down payment to purchase a new house. My husband is a HUGE Dave Ramsey fan and wants to wait until we have 30% down and do a 15-year mortgage instead of the 30. The problem is it will take us at least another 3-4 years to save the additional 10%. What should we do?
A. Dave Ramsey is wrong in this scenario. Interest rates are still historically low and I think you should take advantage of them now! Here is why:
- If you wait four years to get a loan, interest rates could go up 1 to 2% or even more. This could add thousands to your payments.
- Instead of taking a 15-year mortgage in three years, pay one extra payment per year. This usually reduces your mortgage to 22 years.
- House prices could increase. If this happens with a rate increase, it may be 10 years before you are able to buy a house
Q2. What’s the best investment?
A. The best investment is always investing in yourself. If you aren’t investing 3% of your income back into yourself then you are missing out.
Q3. How can I earn more money now?
- Ask for a raise. This is probably the easiest way to earn more money. Ramit Sethi has hands down the best advice on this.
- Get a new job.
- Start a side business. Here are a few ways.
Q4. My financial advisor is trying to put my $50,000 inheritance into “A” share mutual funds. There is a 4.5% upfront fee plus an average annual fee of 1.25%. What do you think?
A. Run away as fast as Usaine Bolt in the 200-meter dash – Olympic Style!
Fees should never be this high…never! He/she wants you to pay over $2,000 for the privilege of investing in these funds?
Stop it please!
Additionally, the annual fees are almost a full point higher than using a service like Wealth Front. Check out this video I created discussing how fees impact your investments.
Q5. What should I do with my 401(k) at my previous employer?
A. You have a few options:
- Cash out if you want to pay a 10% penalty plus taxes
- Keep it there and let your previous employer control your investment options
- Roll it over to an IRA and invest it in low-cost portfolio of ETFs (your best option)
Q6. I just paid off my credit card; should I cancel it?
A. No! Typically it is not a good idea to cancel your credit cards because it may negatively impact your credit score.
Two of the five factors used in determining your credit score are your credit card usage rate and credit history.
Canceling your card will reduce the amount of credit you have and will also erase all the payments you made on time. This will then negatively impact your score.
When your score gets lowered, then you will pay higher interest rates for cars and home loans.
Q7. Travis, what’s the worst investment mistake you made?
Oh boy, I could write an entire book on my bad decisions.
I have had credit card debt, purchased things when I shouldn’t have, and got too cocky with my own investments as a financial advisor.
Anyways, the biggest mistake I still kick myself in the ass for is putting all of my 401(k) money in my company stock. It cost me over $30,000 dollars and hundreds of thousands of future dollars. You can read about it here if you want a good cry.
If you have a question you want me to answer about personal finance; then email me at [email protected].